Economists' Outlook

Housing stats and analysis from NAR's research experts.

Foreign Buyer Purchases Fall to Lowest Level With Lingering Impacts into 2022

Not surprisingly, amid the coronavirus pandemic that led to a decline in global economic output and a collapse in international travel, foreign buyer purchases of U.S. existing homes fell to the lowest level in a decade.1 During April 2020–March 2021, the dollar volume of U.S. existing homes purchased by foreign buyers fell 27% to $54.4 billion and the number of existing homes purchased fell 31% to 107,000 units compared to the levels in the prior 12-month period.

The dollar volume of foreign buyer purchases whittled down to 2.8% of the $5.8 trillion of existing-home sales during this period, from a peak of 10% in 2017. In terms of number of homes sold, foreign buyer purchases accounted for just 1.8% of existing-home sales, from a peak of 5.2% in 2017.

To date, foreign buyer purchases in the United States have been declining since 2017 as foreign buyers faced headwinds such as the tighter monitoring of dollar outflows by China since 2017; a decline in global trade, investment, and world output due to the US-China trade war during 2018–2019; a decline in the number of immigrant and non-immigrant visa issuances (tourist, business, student, and work visas) since 2016; and the economic slowdown in the United Kingdom in the wake of the decision of the United Kingdom to leave the European Union ("Brexit").

Meanwhile, in the United States, homebuyers—both domestic and foreign—faced the severest housing shortage in years, with the inventory of existing homes for sale plummeting to a low of 1.9 months during December 2020―January 2021 (2.6 as of June 2021) and home prices rising by 23.4% as of June.

Bar chart: Dollar Volume of Existing-Home Purchases by Foreign Buyers in Billion Dollars, 2011 to 2021
Line graph: Foreign Buyer Purchases as a Percent of Existing-Home Sales, 2011 to 2021

Origin of International Buyers: China Falls to #3 in Number of Homes Purchased

Measured by the number of homes purchased, China—which had been the top country of origin of foreign buyers since 2015—fell to third place with a 6% share. Canada emerged as the top country of origin among foreign buyers during April 2020–March 2021, accounting for 8% of foreign buyer purchases. Mexico came in second, with a 7% share. India and the United Kingdom tied at fourth place, each with a 4% share.

However, in terms of the dollar volume of purchases, China remained as the top foreign buyer, with purchases totaling $4.5 billion. However, this is just about a sixth of the $31.7 billion dollars in purchases in 2017. The dollar volume of Chinese foreign buyer purchases fell by about half during April 2018–March 2019, when the United States and China's relations soured in a tit-for-tat trade war that the led to a global economic slowdown.

Line graph: Dollar Volume of Existing-Home Purchases of the Top Five Foreign Buyer Countries

Major Destination of Foreign Buyers: Florida, California, Texas, Arizona, New Jersey, and New York

Florida remained the major destination for foreigners, with 21% of foreign buyers purchasing property in the state. Florida's main buyers were from Latin America (34%), Europe (23%), and Canada (17%). It was the top state destination among Canadian and United Kingdom buyers, who are typically vacation home buyers and who purchase property in Florida for its warm weather.

California was the second-largest state where foreign buyers purchased property. Forty-seven percent of California's foreign buyers came from Asia/Oceania. It was the top destination among Chinese and Asian Indian buyers. Geographical proximity, the presence of family and friends, and the tech sector jobs in California are the factors that are likely driving Chinese buyers to purchase property in California.

Texas attracted 9% of foreign buyers. Forty-two percent of Texas' buyers came from Latin America/Caribbean. Texas was the top destination among Mexican buyers and the second top destination among Asian Indian buyers. Texas has a cultural and geographic affinity with Mexico, while Asian Indian buyers are likely working in tech-sector jobs in Texas (e.g., Austin).

Arizona was the fourth largest state where foreign buyers purchased property. Half of foreign buyers were from North America (Canada). Nearly one in four Canadian buyers purchased a property in Arizona, which Canadians prefer for the warm weather. It's also one of the top destinations among Mexican buyers, due to Mexico's proximity to Arizona.

New Jersey accounted for 4% of all buyers. Fifty percent of New Jersey's buyers came from Asia/Oceania. It's one of the top destinations among Chinese, Asian Indian, Mexican, and United Kingdom buyers. New York accounted for 4% of foreign buyers, with 51% coming from Asia/Oceania. It was the third top destination among Chinese buyers. Both these gateway cities attract buyers from across the globe.

Table: Where Top Foreign Buyers Purchased U.S. Residential Property, April 2020 to March 2021

Decline in Foreign Buyer Had Little Impact on the U.S. Housing Market

The decline in foreign buyer demand has had little impact on home sales and home prices even in vacation home markets and in gateway cities.

Most foreign buyers who live abroad pay cash, at 61%. Yet even with foreign buyers retreating, the share of cash sales has been rising, to 23% as of June 2021 from 16% one year ago.

NAR's 2021 Vacation Home Counties showed that home sales in vacation home counties of 16.4% outpaced home sales growth of 5.6% in non-vacation home counties in 2020.

In fact, one can argue that the decline in foreign buyer demand has helped alleviate the demand-supply imbalance. Given the strong domestic demand from buyers who face record-low mortgage rates and the lowest supply of homes on the market in decades, competition remains tough, leading to a 23% year-over-year gain in the median existing-home sales price. REALTORS® reported an average of five offers on sold properties. The inventory of homes for sale (end of the month) was still 19% below last year's level, despite some uptick in housing starts to 1.6 million in June (seasonally adjusted annual rate) from 1.3 million at the beginning of the year.

Foreign Buyer Outlook: Lingering Pandemic Impact in 2021-2022 with Strong Growth Potential in Affordable Tech-Driven Markets

Foreign buyer purchases are likely to just tick up a little in 2021 and 2022 with the entry of immigrants and non-immigrants from China, Iran, the European Schengen area, the United Kingdom, Republic of Ireland, Brazil, South Africa, and India still severely restricted as of July 2021. The rising number of Delta variant cases is also casting a shadow on the 2022 market outlook.

However, a stronger recovery is forthcoming when international travel restrictions are lifted and as global trade and investment also pick up. The United States is still the biggest economy in the world and attracts immigrants, tourists, investors, and workers across the globe. Foreign buyers who primarily live abroad (40% of foreign buyers) and just visit the United States for business travel or pleasure will tend to buy vacation properties, while recent immigrants and foreign buyers who live/work/study in the United States (60% of foreign buyers) will tend to purchase homes for use as a primary residence.

However, foreign buyer purchases are not likely to rebound to the $31.7 billion peak level in 2017 for quite some time. Firstly, the Employment-Based 5th Preference (for investors), or EB-5 Immigrant Investor Regional Center Program, expired at midnight on June 30, 2021. EB-5 Visa allows eligible investors and their family members to obtain conditional permanent residency in the United States for two years through an investment of $1 million or more that creates or preserves at least 10 jobs. About 10,000 EB-5 visas are issued every year.2 Secondly, the tight monitoring of dollar outflows from China are still in place, with a $50,000 cap annually per individual.

The purchases of foreign buyers, particularly among foreign buyers living in the United States on work or investor visas, will follow where U.S. companies are creating jobs and where homes are affordable. States that had a large net international migration in 2020 were Tennessee (+54,650), Utah (20,721), North Carolina (+13,387), Georgia (+13,275), and Ohio (+13,303). Immigrants could be renting or buying homes but, either way, transactions with international buyers are likely to increase in more affordable states that are creating a lot of tech-sector jobs.

1 Since NAR estimated the dollar sales volume of foreign buyer purchases in 2011

2U.S. Department of Homeland Security Immigration Statistics: 9,877 (2017), 9,623 (20180, 9,085 (2019)